Thompson v Turner Hopkins
[2018] NZCA 197
•18 June 2018 at 11 am
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| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA204/2017 [2018] NZCA 197 |
| BETWEEN | IAN ALLEN THOMPSON |
| AND | TURNER HOPKINS |
| Hearing: | 20 February 2018 (further submissions received 5 March 2018) |
Court: | Asher, Clifford and Williams JJ |
Counsel: | W A McCartney for Appellant |
Judgment: | 18 June 2018 at 11 am |
JUDGMENT OF THE COURT
AThe appeal is allowed.
BThe summary judgment in favour of the respondent is set aside.
C There is no order as to costs.
____________________________________________________________________
REASONS OF THE COURT
(Given by Asher J)
Table of Contents
| Para No | |
| Introduction The tort of breach of statutory duty Mr Thompson’s further claim Should this Court consider the proposed new cause of action? Further defences in support of summary judgment Did the Building Contract clearly allow DDC to register the mortgages? General conclusion | [1] [45] [61] |
Introduction
Sections 164 and 164A of the Land Transfer Act 1952 (the Act) set out the process of certification of instruments that are being registered. At issue in this appeal is whether those sections create a statutory duty: that is, does the giving of a false certificate found a private law, strict liability, cause of action. The law firm that gave the allegedly false certificate is the respondent, Turner Hopkins, who acted for a contractor repairing a leaky townhouse block in Auckland. The appellant and plaintiff in the proceedings is Ian Thompson, who was the owner of two townhouses and a member of the block’s Body Corporate. Associate Judge Doogue granted Turner Hopkins’ defendant summary judgment application, thereby bringing Mr Thompson’s claim against Turner Hopkins for breach of statutory duty to an end.[1] Importantly, as will become apparent later in this judgment, during the appeal Mr Thompson proposed a further cause of action against Turner Hopkins based on negligence.
Key facts
[1]Thompson v DD Construction Ltd [2017] NZHC 516.
The claim against Turner Hopkins was one of a number of causes of action brought against multiple defendants by Mr Thompson arising from repairs carried out to an eight-unit townhouse block in Grey Lynn. Mr Thompson was the owner of two of the unit titles. They proved to be leaky. DD Construction Ltd (DDC) was contracted by the Body Corporate to carry out the remedial work on a time and materials basis. As the work progressed there were disputes between the Body Corporate and Mr Thompson on the one side, and DDC on the other. The Body Corporate and Mr Thompson issued proceedings against DDC and the sole director of DDC, Darryl Montgomery, alleging misleading and deceptive conduct by them in relation to the cost of the repairs. In essence, they say they incurred losses because the remedial work ended up costing more than DCC had said it would. They also claimed against Turner Hopkins.
Turner Hopkins acted for DDC in dealings with the Body Corporate and Mr Thompson. Clause 19.5 of the Building Contract between the Body Corporate and DDC (the Building Contract) provided:
19.5In consideration of the Builder entering into this Contract the Owner irrevocably grants to and agrees to execute in favour of the Builder:
a)A registrable all obligations mortgage (Memorandum of Mortgage RGL 2011/4200, or the most current Auckland District Law Society all obligations Memorandum, which is registered at the various land registries of Land Information New Zealand) over all of the Owner’s estate and interest in the Property (the “Mortgage”) to secure payment of the Builder’s invoices and any other sums payable to the Builder pursuant to this Contract; and
b)An unconditional irrevocable power of attorney in favour of the Builder to execute the Mortgage on the Owner’s behalf, whether or not the Builder has made demand on the Owner to do so.
When the remedial work ran both over time and over budget, individual owners ended up paying DDC’s invoices when due. Mr Thompson ultimately refused to pay the last four invoices issued by DDC, which had a combined value of $20,014.62. On 13 April 2015 Mr Thompson’s solicitors wrote to Turner Hopkins raising concerns about the cost of the work. On 24 April 2015, relying on cl 19.5 one of the partners of Turner Hopkins, Mr Stirling, registered a mortgage against each of Mr Thompson’s unit titles to secure the unpaid amount.
Crucially in relation to the claim against Turner Hopkins, on the documents registered with the Land Registry Office, Mr Stirling certified in accordance with the form prescribed[2] that he had authority from both DCC and the mortgagor, Mr Thompson, to register the mortgages.
[2]Land Transfer Regulations 2002, reg 12.
Mr Thompson’s statement of claim asserts that neither Mr Stirling nor anyone else had his authority to lodge the mortgage instruments and Mr Stirling’s certification was false because:
(a)The Building Contract was between DDC and the Body Corporate, not between DDC and Mr Thompson.
(b)The Body Corporate had agreed in the Building Contract to execute a mortgage over property that was not either of Mr Thompson’s unit titles.
(c)The Body Corporate had no authority to agree to mortgage Mr Thompson’s units.
(d)The Body Corporate had not executed a mortgage over the property described in the Building Contract, or any other property.
(e)The Body Corporate had agreed to execute a power of attorney in favour of DDC to execute a mortgage on the Body Corporate’s behalf, but the Body Corporate had not executed any such power of attorney.
(f)Mr Thompson never agreed that his properties could be mortgaged by DDC.
(g)There is no memorandum in writing, signed by Mr Thompson that would satisfy s 25 of the Property Law Act 2007.
The actual cause of action against Turner Hopkins was concisely expressed. We set it out in full:
58.Sixth cause of action: [Mr Thompson] against [Turner Hopkins] — breach of statutory duty
59.Stirling’s certification that he held [Mr Thompson’s] authority to register the mortgages was false and a breach of his statutory obligation to give a correct certification pursuant to s 164A Land Transfer Act 1952.
60.The third defendant, Turner Hopkins, is liable for Stirling’s acts and omissions.
61.As a result of the breach of statutory duty the [Mr Thompson] has suffered the losses set out in paragraph 55 hereof.
62.Wherefore [Mr Thompson] claims against [Turner Hopkins]:
(a)Judgment for $22,595.07
(b)Costs
(c) Interest
Where a defendant applies for summary judgment, a defendant has to show that the plaintiff cannot succeed. Most of Associate Judge Doogue’s judgment was concerned with the causes of action against DDC and Mr Montgomery. He declined their defendant applications for summary judgment.
He dealt with the claim of breach of statutory duty against Turner Hopkins in short fashion. He relied on the case of X (Minors) v Bedfordshire County Council, quoting the principles set out by Lord Browne-Wilkinson.[3] He concluded:
[53] The certificate is provided to the registrar. It is intended to provide assurance to the registrar that there is a proper cause for lodging the instrument which will, on acceptance by the registrar, affect the legal title of which the register is the defining document. The certificate is at least implicitly provided only to the registrar. There is no requirement that any other person, such as the proprietor of the title affected, receive a copy of the certificate. This would indicate in my view that the procedure of giving such certificates is not designed to provide information or reassurance to many other parties, again, such as the proprietor of the title.
[3]X (Minors) v Bedfordshire County Council [1995] 2 AC 633 (HL) at 731.
He considered, therefore, that the proposed cause of action against Turner Hopkins was not viable or arguable and ordered that judgment be entered for the firm. He did not go on to consider whether it was arguable on the facts that Mr Stirling had authority to lodge the mortgage.
Mr McCartney for Mr Thompson submitted that it was clear that the Building Contract did not authorise DDC to register the mortgages, and was not a proper basis for Mr Stirling’s certificate. Ms Grant for Turner Hopkins contested this, and sought to support the judgment on the further grounds that, on the facts, Mr Stirling had proper authority to certify, and other matters that we refer to later.
The initial issue to be determined in this appeal is whether Associate Judge Doogue was right to conclude that the certification requirements in s 164A of the Act do not create a statutory duty, that is the giving of a false certificate does not found a private law cause of action. Mr McCartney argued that an intention to create a such a duty can be gathered from the provisions and structure of the Act. The requirements of the cause of action of breach of statutory duty were clearly made out, and the Judge’s assessment that such a claim could not succeed was incorrect. Ms Grant argued to the contrary that there was nothing in the Act to suggest that Parliament intended to create a duty actionable in private law. Any duty under s 164A was owed to the Registrar-General of Land (the Registrar) only, and a cause of action based on breach of statutory duty could not succeed.
We note at the outset that in respect of the cause of action in question there is no allegation of negligence or fraud. This is a claim based on what has been called breach of statutory duty simpliciter.[4]
The pleaded cause of action — breach of statutory duty
The tort of breach of statutory duty
[4]At 731.
In early times in England a breach of any statutory provision could give rise to a claim for damages. All the plaintiff had to prove was loss consequent upon the breach. If that were the position today, following the proliferation of closely prescriptive statutes, the common law would have a different shape. A turning point was reached, and in the leading 1877 decision of Atkinson v Newcastle and Gateshead Waterworks Co, it was held that an action for damages does not automatically lie for a breach of every statute.[5] Instead the courts will examine whether a statutory intention can be discerned in the relevant provision to confer a civil right of action for its breach. It is a matter of construction of the section in its statutory context. Without such a discernible intention a breach of statutory duty does not by itself give rise to any private law cause of action.[6] The House of Lords put it this way in Cutler v Wandsworth Stadium Ltd:[7]
The only rule which in all circumstances is valid is that the answer must depend on a consideration of the whole Act and the circumstances, including the pre-existing law, in which it was enacted.
[5]Atkinson v Newcastle and Gateshead Waterworks Co (1877) 2 Ex D 441 (CA).
[6]See the discussion in Stephen Todd “Breach of Statutory Duty” in Stephen Todd (ed) The Law of Torts in New Zealand (7th ed, Thomson Reuters, Wellington, 2016) 451 at 453–456.
[7]Cutler v Wandsworth Stadium Ltd [1949] AC 398 (HL) at 407 per Lord Simonds.
Therefore the Court must consider the provisions of the Act, applying the usual purposive interpretation.[8] Was it the intention of Parliament that there should be a private law remedy for a breach of ss 164 and 164A? The difficulty with this is, as Lord Diplock put it in Boyle v Kodak Ltd: “The statutes say nothing about civil remedies for breaches of their provisions. The judgments of the courts say all.”[9]
[8]Gorringe v Calderdale Metropolitan Borough Council [2004] UKHL 15, [2004] 1 WLR 1057 at 1059.
[9]Boyle v Kodak Ltd [1969] 1 WLR 661 (HL) at 672.
While some sections will indeed provide for civil remedies, that is not the usual situation. Most statutory provisions that place an obligation on a person to do something, here to give a correct certificate, say nothing about the private law consequences of breach. A court will not lightly assume a legislative intention to create a right to sue for damages for a breach of the statute in the absence of words that are clearly of that effect. It is, after all, very easy for the legislature to spell out the consequences of a breach, and indeed as we will set out, this is done in relation to the duty to certify.
Certificates under the Act
When a Torrens system of registration of title was created in New Zealand by the Land Transfer Act 1870 it became the state’s obligation to guarantee title through the register. It was necessary for the Registrar, who was responsible for the register of titles, to have the benefit of a reliable and prescribed system for the presentation of documents for registration. As part of that process, s 112 of the Land Transfer Act 1870 provided that all instruments dealing with land must be entered with a certificate signed by the applicant that the instrument was correct for the purposes of that Act. Prior to 2002, that certificate was simply to state: “Certified correct for the purposes of the Land Transfer Act 1952”.[10]
[10]Land Transfer Regulations 1966, sch 3.
In relation to the purpose of this and later permutations of this section, the statement in the text by E C Adams, The Land Transfer Act 1952, has been quoted in New Zealand cases:[11]
The certificate of correctness probably is a guarantee that the Registrar may accept an instrument at its face value, ie, that the person signing the certificate is aware of the antecedent circumstances which culminated in the execution of the instrument … The Registrar only sees what actually appears in the instrument, hence it seemed necessary to have the dealing vouched for. In other words, the Registrar places a trust in the solicitor or broker, and when a person certifies an instrument, only reasonably close contact with the facts which culminate in the execution of that instrument would appear to discharge that trust …
[11]EC Adams The Land Transfer Act 1952 (2nd ed, Butterworths, Wellington, 1971) at 382. See for example Registrar-General of Land v Marsh [1995] 2 NZLR 189 (HC) at 200; and Burmeister v O’Brien [2010] 2 NZLR 395 (HC) at [209].
The successor to the original s 112 is now s 164 of the 1952 Act, which provides:
164 Correctness of instrument to be certified
(1) No Registrar shall receive any application for bringing land under this Act, or any instrument purporting to deal with or affect any estate or interest under the provisions hereof, unless there is endorsed thereon a certificate that the same is correct for the purposes of this Act, signed by the applicant or party claiming under or in respect of the instrument, or by a practitioner employed by that applicant or party:
provided that where any instrument has not been certified as correct under the foregoing provisions of this subsection any other person who is a party to the instrument or claims any interest thereunder or in respect thereof or his legal personal representative may apply to the High Court for authority to certify that the instrument is correct for the purposes of this Act, and the court may order accordingly if it is satisfied that it is just and expedient that the authority be granted; and, upon production of a sealed copy of the order, the Registrar may register the instrument if it is certified as correct for the purposes of this Act by the person so authorised.
(2)A corporation may authorise any person to certify on its behalf.
(3)Every person who falsely or negligently certifies to the correctness of any such application or other instrument commits an offence, and is liable on conviction before a District Court Judge to a fine not exceeding $100.
It is clear in the context of the Torrens system, and the importance of the register, that the purpose of the certificate was and is to assure the Registrar that the instrument is bona fide and genuine and ought to be registered.[12]
[12]At 382.
Provision was made for the electronic automation of the land titles system in New Zealand in the Land Transfer (Automation) Amendment Act 1998. This was largely re‑enacted by the Land Transfer (Computer Registers and Electronic Lodgement) Amendment Act 2002 (the Amendment Act). Electronic instruments generally replace paper instruments. Electronic instruments are no longer executed by the party, such as a transferor or mortgagor, granting the relevant interest in land. Rather such instruments are created in what are described in the Amendment Act as “electronic workspace facilities”, from where they are electronically lodged for registration. Section 164A was inserted into the Act, by the Amendment Act, to provide for certification under the new electronic regime:
164A Certification
(1) Every instrument to which this subsection applies must contain a certification that complies with subsection (3).
(2) Subsection (1) applies to—
(a) electronic instruments; and
(b) paper instruments of a class specified for the purpose by regulations made under this Act.
(3) Certifications must specify that—
(a) the person giving the certification has authority to act for the party specified in regulations in relation to that class of instrument and that party has legal capacity to give such authority;[[13]] and
(b) the person giving the certification has taken reasonable steps to confirm the identity of the person who gave the authority to act; and
(c) the instrument complies with any statutory requirements specified by the Registrar for that class of instrument; and
(d) the person giving the certification has evidence showing the truth of the certifications in paragraphs (a) to (c) and that the evidence will be retained for the period prescribed for the purpose by regulations made under this Act.
(4) Regulations made under this Act may prescribe the form of certifications under this section.
(Emphasis and footnote added.)
[13]For mortgages, see Land Transfer Regulations 2002, reg 11.
When an instrument is certified in accordance with the Act, that instrument then has the same effect as a deed executed by the relevant party or parties.[14] Further, the instrument must be regarded for the purposes of every enactment and rule of law as if it had been made in writing and duly executed by the relevant parties.[15] Any person who gives a certification must retain evidence showing the truth of the certification for 10 years from the date on which the instruments to which the certification relates is lodged for registration.[16] Given that it is the Registrar who has the obligation to maintain the register under s 33 of the Act, it could be expected that such a system be set up to ensure that the Registrar gets accurate information that can be relied upon, and in respect of which there are consequences should it prove to be inaccurate.
[14]Land Transfer Act 1952, s 164E(1).
[15]Section 164E(3).
[16]Section 164C(3) and (4). See also Land Transfer Regulations 2002, reg 14.
It can be seen that with the move to electronic registration, the provisions for registration became more prescribed, with an explicit requirement to certify authority to act for the party specified. It is required that there be confirmation of the identity and legal capacity of that party, compliance with the statutory requirements for that class of instrument and evidence of the truth of the certifications. Section 164A does therefore require a more detailed certificate than that which was required under the 1870 Act. The form of certification is set out in reg 12 of the Land Transfer Regulations 2002.
When registering the mortgages against Mr Thompson’s unit titles, Mr Stirling filed a certificate following the prescribed form which contained the following statements:
Mortgagor Certifications
I certify that I have the authority to act for the Mortgagor and that the party has the legal capacity to authorise me to lodge this instrument.
I certify that I have the authority to act for the Mortgagee and that the party has the legal capacity to authorise me to lodge this instrument.
I certify that I have taken reasonable steps to confirm the identity of the person who gave me authority to lodge this instrument.
I certify that any statutory provisions specified by the Registrar for this class of instrument have been complied with or do not apply.
I certify that I hold evidence showing the truth of the certifications I have given and will retain that evidence for the prescribed period.
We turn to consider whether the giving of such a certificate can, if it is inaccurate, give rise to a private law claim for breach of statutory duty.
The terms of the section
In the original 1870 Act at s 112 there was a statement that any person who falsely or negligently certified to the correctness of an application or other instrument would incur a penalty not exceeding 50 pounds. It was then stated:
Provided always that such penalty shall not prevent the person who may have sustained any damage or loss in consequence of error or mistake in any such certified instrument or any duplicate thereof from recovering damages against the person who shall have certified the same.
A proviso to that effect continued in the Land Transfer Act 1915. However the proviso was dropped from the Act in 1952. It was stated in the explanatory note to s 164(3):[17]
In clause 164(3) the existing provisions of section 175(3) of the Land Transfer Act 1915 preserving the civil remedies of persons affected by a false or negligent certificate as to the correctness of an instrument have been omitted, as being already covered by section 355 of the Crimes Act 1908.
[17]Land Transfer Bill 1953 (89-1) (explanatory note) at i.
Thus the proviso that preserved civil remedies was deliberately omitted. Section 355 of the Crimes Act 1908, which is referred to, created no civil liability in itself, but simply preserved civil remedies when the act or omission also amounted to a criminal offence. This indicates that the intention of the proviso had not been to create any new liability, but rather to preserve existing remedies.
Given that the proviso and s 355 created no remedy themselves, but rather preserved existing civil remedies when there was also an offence, it is a matter then of going back to the words of ss 164 and 164A and the purpose of the Act to decide whether a private law duty exists.
Sanctions and compensation provisions in the Act
Section 164(3) states that every person who falsely or negligently certifies to the correctness of any such application or other instrument commits an offence, and is liable on conviction before a District Court Judge to a fine not exceeding $100. There is also provision at s 225(1)(d) for imprisonment for a term not exceeding three years or a fine not exceeding $1,000 where a person knowingly or recklessly gives a certificate under s 164A that contains an incorrect particular, and up to four years’ imprisonment under s 226(h) for a person who gives a fraudulent certificate under s 164A.
Where a statute does not expressly provide for any penalty or remedy for breach, there is a greater likelihood that it may be intended that there be a civil damages remedy. In Morton v Eltham Borough it was held that where there was a bare duty to supply and continue to supply gas, and no provision for enforcement, a damages action was available.[18] Conversely if the statute sets out penalties and remedies, as the Act does, this is some indication that no damages action is intended.[19] The existence of specific provisions dealing with the consequences of a breach tends to point away from the availability of a private law action, as the legislature has turned its mind to the consequences of breach, and set out penalties, but has not created a civil remedy.[20]
[18]Morton v Eltham Borough [1961] NZLR 1 (SC) at 4–5. See also Harris v Lombard New Zealand Ltd [1974] 2 NZLR 161 (SC) at 168–171.
[19]X (Minors) v Bedfordshire County Council, above n 3, at 731.
[20]Select 2000 Ltd v ENZA Ltd [2002] 2 NZLR 367 (CA) at [55].
In addition to provision for penalties there are compensation provisions in ss 172–181 of the Act. Under s 172(a), a claim may be brought by Mr Thompson against the Registrar for his loss or damage arising from a mistake by the Registrar. Arguably, the registration of an instrument lacking authority is still a mistake by the Registrar notwithstanding that the mistake is induced by an incorrect certification that the Registrar was entitled to rely on under the Act. Section 172(b) also allows for claims for compensation by anyone who is deprived of an interest in the land as a result of a mistake in registration and who is barred from bringing an action for possession or other action for the recovery of that land by the Act. The claims are against the Crown, not against practitioners who certify. Further s 175 enables the Crown to recover the amount of compensation paid to persons who have suffered loss as a result of fraudulent behaviour or misrepresentations from the party responsible for that behaviour. There is an express provision in s 175(1A) for the Crown to recover compensation from practitioners where their negligence has caused loss.
This express regime for penalties and compensation, and recovery of compensation paid by the Crown from wrongdoers, is inconsistent with Mr McCartney’s submission that Parliament intended to, in addition to this regime, create a strict liability private law right of action against persons who file erroneous certificates. The inclusion of the criminal sanctions and the provisions for compensation indicate that the Act is self-contained in relation to the consequences of incorrect certification, and a no-fault civil remedy should not be added to the remedies available.
Under s 243(1) neither the Registrar nor any delegate of the Registrar is personally liable for any act done or omitted in the performance of a duty under the Act. Mr McCartney relied on this provision as indicating a duty, as Parliament has expressly delineated who is immune from private law claims and has not included persons who provide certification. In our view, Parliament has done no more than provide protection for employees and office holders under the Act.
To whom are ss 164 and 164A directed?
As we have set out, the purpose of a certificate is to assure the Registrar that the instrument being registered is bona fide and genuine. It is seen as a guarantee that the Registrar can accept an instrument at its face value. The Registrar is entitled to assume that the person signing the certificate is aware of the circumstances which have led to the execution of the instrument.
The Registrar places trust in the certifying practitioner that everything is in order. This can be seen from the words in s 164A(3)(c), which requires certification that the instrument complies with any statutory requirements specified by the Registrar, and the Registrar’s right in s 164B to revoke a person’s right to give a certification under s 164A at any time in the event of fraud, certification that is materially incorrect or where there has been a failure to comply with any requirement under s 164B(2)(c). The Registrar also has the right under s 164B(4) to reinstate a person’s right to give certifications. It is the Registrar who may specify requirements that must be met to satisfy the evidence retention obligation and who may require a person who has given a certification to produce evidence or provide a statement.[21] In the form of certification in reg 12 of the Land Transfer Regulations there is a reference to the statutory provisions “specified by the Registrar” in respect of Māori land.
[21]Land Transfer Act, s 164C(2).
The general tenor of the words of s 164A of the Act indicates a certificate is given to the Registrar to provide an assurance to the Registrar that the instrument is genuine and compliant with the requirements of the Act. There is no requirement that any other person, such as the registered proprietor, receive a copy of the certificate. This suggests that ss 164 and 164A are directed at protecting the Registrar, not third parties such as Mr Thompson.
All these factors indicate that the procedure of giving certificates is not designed to provide information or reassurance to the public at large or indeed any section of the public, but is designed to give reassurance to the Registrar.
We also accept Ms Grant’s submission that it is difficult to ascertain how a solicitor’s duty to proprietors in relation to certification should be defined, if it exists. If it is strict liability, an honest but reasonable mistake would give rise to a claim as pleaded. There is nothing to indicate that Parliament intend such severe consequences for an innocent error. The Torrens system as created does not achieve protection for registered proprietors by enacting sanctions so that lawyers and conveyancers are strictly liable to registered proprietors for errors. It achieves protection for registered proprietors by creating the best system possible to assist the Registrar in maintaining an accurate register.
It must also be asked, who can bring a claim for a failure to provide an accurate certification? Is it any member of the public? Does it have to be by a party to the transaction? What about the holder of an equitable interest that has not been registered, and who loses priority as a consequence of the registration? This uncertainty points away from Parliament intending that innocent conduct should be actionable by all those who are affected by erroneous registrations.
Conclusion
Lawyers have a professional duty when they certify to have reasonable grounds to believe the matter certified is correct, and to take appropriate steps to ensure the accuracy of that which is certified.[22] But in the context of the Act the goal of these obligations is the protection of the register, not parties to the transaction such as Mr Thompson. There is no indication of a legislative intention that there be a cause of action available to third parties if there is a breach. Sanctions are provided for under the penalty provisions of the Act.
[22]Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, rr 2.5 and 2.6.
Thus, ultimately for the same reason concisely summarised by Associate Judge Doogue, we agree that the cause of action based on breach of statutory duty is certain to fail against Turner Hopkins.
Mr Thompson’s further claim
In the course of his oral submissions Mr McCartney submitted as a further argument that there is also an available claim in negligence against Turner Hopkins. He argued that the entry of summary judgment would, through the doctrine of issue estoppel, prevent such a claim from being made, thus doing an injustice.
We gave Mr Thompson leave to file a further submission on this proposed new cause of action, and a draft amended statement of claim showing the new cause of action, which he has done. Ms Grant opposed the introduction of a new proposed pleading. She has filed submissions in reply.
Should this Court consider the proposed new cause of action?
We must now assess whether the proposed new cause of action should be considered on this appeal. We are mindful of the fact that a negligence cause of action was not before Associate Judge Doogue, and indeed not before this Court until the latter stages of the hearing of the appeal. However, last-minute applications to amend in the context of both strike-out applications and summary judgment applications are not uncommon. The pre-emptory nature of the summary judgment process and the severe consequences of judgment terminating a claim prompt the courts to be generous in such matters.
Thus in Westpac Banking Corp v M M Kembla New Zealand Ltd it was noted that courts do not strike out pleadings where a defect can be cured by amendment which the party is willing to make.[23] It was said:[24]
Similarly, the residual discretion of the Court under [r 12.2 of the High Court Rules 2016] to refuse summary judgment would be properly invoked to avoid the oppression which would otherwise result if an application by a defendant for summary judgment would preempt a plaintiff exercising the right to amend the pleadings in terms of [r 7.77]. Indeed, use of the discretion to enable amendment is arguably more necessary in the interests of justice in the case of summary judgment than in the case of strike-out because summary judgment results in issue estoppel.
[23]Westpac Banking Corp v M M KemblaNew Zealand Ltd [2001] 2 NZLR 298 (CA).
[24]At [66].
It is hard on a defendant seeking summary judgment to have to face a very late addition to pleadings, involving as it does a new basis for claim. However when a party to proceeding chooses a truncated process such as strike-out or summary judgment it places the opposing party in a situation where it does not have the usual time and opportunity to develop a case as it would if the case went to trial. The prospect of amendment, even a very late amendment, must always be a possible development that can arise as a consequence of the chosen truncated process. If an amendment is required to allow the other party to better formulate its claim or defence it will generally be allowed. To prevent parties in the lead up to trial from airing all issues, or to require it to start again, runs against the just, speedy and inexpensive resolution of disputes.[25] Delay and cost to the party seeking to strike out a summary judgment can be reflected to some extent by costs orders, but in the end if a party choses the shortened procedure, it must endure all the consequences.
[25]High Court Rules 2016, r 1.2.
We conclude that it is open to us to allow the appeal with the effect that summary judgment is refused, on the ground that an amendment to the statement of claim which is now proposed might raise a cause of action that could possibly succeed. We go on to consider the question of whether the new negligence pleading could succeed.
The negligence claim
The key paragraph in the new pleading asserts that by reason of giving the certification on behalf of the mortgagor Mr Thompson, and by operation of s 164A(3)(a) of the Act and regs 11 and 12 of the Land Transfer Regulations, Mr Stirling was in fact acting for Mr Thompson when certifying and accordingly owed a duty of care to ensure that he did not register mortgages on the titles without Mr Thompson’s authority.
In assessing whether Turner Hopkins through Mr Stirling owed a duty of care to Mr Thompson, it must be recognised immediately that Mr Thompson was not the client of Mr Stirling or Turner Hopkins. Turner Hopkins’ client was DDC and DDC’s interests were entirely opposed to those of Mr Thompson. Mr Thompson was on the other side of the transaction, and when he refused to pay DDC’s invoices, was on the other side of the dispute. As Ms Grant submitted, DDC’s interest was in getting mortgages registered on Mr Thompson’s properties as quickly as possible.
The fact that Turner Hopkins was on the other side of the transaction and was not acting for Mr Thompson does not mean that it is impossible for the firm to owe Mr Thompson a duty of care. In certain cases it has been held that there is a duty owed by a solicitor to someone other than the solicitor’s own client, who is on the other side of the transaction or proceeding. An example is the case of Allied Finance and Investments Ltd v Haddow & Co.[26] There, a solicitor acting for the buyer of a yacht certified to a lender advancing moneys on the security of the yacht that the security instrument was fully binding on the buyer. This Court held that the solicitor’s certificate was an exercise of professional expertise.[27] A certificate had been given on which reliance by the other party was to be contemplated. The proximity of the relationship was sufficiently close for a duty of care to arise.
[26]Allied Finance and Investments Ltd v Haddow & Co [1983] NZLR 22 (CA).
[27]At 25.
In Gartside v Sheffield, Young & Ellis a solicitor had accepted instructions to prepare a will for a client, and was held to owe a duty to exercise reasonable care in respect of a beneficiary under the proposed will to carry out the instructions with due diligence and present the will for execution within a reasonable time.[28] In Connell v Odlum it was held that it was arguable that a duty was owed by a wife’s solicitor to a husband in certifying an agreement under the Matrimonial Property Act 1976.[29] In these cases a concept can be discerned that when a solicitor assumes responsibility to perform a professional service for another in addition to the solicitor’s own client, that relationship can be sufficient to give rise to a duty on the part of the person providing the services to the non-client party. The professional advisor must exercise skill and care.[30] It may not be necessary for the plaintiffs to show reliance.[31]
[28]Gartside v Sheffield, Young & Ellis [1983] NZLR 37 (CA) at 43.
[29]Connell v Odlum [1993] 2 NZLR 257 (CA) at 271–272.
[30]Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 (HL); and White v Jones [1995] 2 AC 207 (HL).
[31]White v Jones, above n 30, at 221–222.
However there have been cases to the contrary, holding that a solicitor owed no duty to persons who are not the solicitor’s client.[32] In the end the issue of whether a duty of care arises is intensively fact-specific.[33] Elias CJ in Couch v Attorney‑General stated that, where a novel duty of care was alleged, “[p]articular care is required in areas where the law is confused or developing.” [34]
[32]Brownie Wills v Shrimpton [1998] 2 NZLR 320 (CA); and Burmeister v O’Brien, above n 11.
[33]In Burmeister v O’Brien, above n 11, which was a solicitor certificate case, the Court held that no duty of care was owed by the solicitor who signed the certificate to the non-client owner of the land. There was a full hearing, and a close analysis of the relationship. The certification in that case was in 2001 when the pre‑electronic regime applied.
[34]Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
In our view, this is a case where such particular care must be applied. There has been some recent alteration to the statutory regime following the advent of electronic registration. The original version of what is now s 164 did not set out matters that had to be specified in the certification, save that the instrument was correct for the purposes of the Act and signed by the applicant or party claiming under or in respect of the instrument. As we have set out, s 164A covers a wider range of specific topics. Mr McCartney, in support of his argument that there may be a duty of care, submitted that the new electronic regime was intended to be significantly more onerous on practitioners than that pre-2002. He submitted that a solicitor must be taken to be aware of the duty being assumed when certification takes place, and that it extends to all the parties for whom he or she purports to certify.
He relies on an article, Australasian Torrens Automation, Its Integrity, and the Three Proof Requirements.[35] The authors argue that the new certification process is far more prescriptive than before, and a far greater responsibility is placed on solicitors in the certification process to make up for the lesser active policing by registry staff. This is now a necessary incident of electronic registration. The article emphasises that the Registrar relies on certification and indemnification by the practitioner that the dealing is appropriate for registration.[36]
[35]Rod Thomas, Rouhshi Low and Lynden Griggs “Australasian Torrens Automation, Its Integrity, and the Three Proof Requirements” [2013] 2 NZ L Rev 227.
[36]At 241.
On the other hand Ms Grant points out that in 2010 the Law Commission in its report, A New Land Transfer Act, stated:[37]
A solicitor lodging a document for electronic registration does not assume a greater role than under the old paper system and is not acting as an agent of the Registrar.
[37]Law Commission A New Land Transfer Act (NZLC R116, 2010) at [4.6].
The ambit of the solicitor’s role and any change to that since 2002 is not a matter that is suited to a summary decision. We have found that the purpose of the certification process is the protection of the register, not third parties. However, while that may work against a finding of proximity in the context of a duty of care, that issue can only be authoritatively determined in the context of a full hearing, where the relevant facts are traversed, and the lawyer’s role is considered in its full factual context. A determination might involve expert evidence.[38] We go no further than to observe that the existence of a duty of care is arguable.
[38]Expert evidence was called in Burmeister v O’Brien, above n 11.
We conclude therefore that the new cause of action in negligence, unlike the statutory duty cause of action, is not certain to fail. Therefore, Turner Hopkins should not get summary judgment.
Further defence in support of summary judgment
Leave was granted to Turner Hopkins to support the judgment on other grounds. These were:
(a)the Building Contract allowed registration of the mortgages as carried out by DDC and Mr Stirling, so it is not arguable that he did not have authority;
(b)the statutory provisions relating to certifications of authority to register documents bind solicitors and not firms, so Turner Hopkins cannot be liable; and
(c)it was Mr Thompson’s actions in not paying the contractual amounts in accordance with the contractual process that gave rise to the registration of the mortgages, so that any losses do not flow from Turner Hopkin’s acts or omissions.
If these points put forward by the respondent are unarguably correct, then the claim must fail and the appeal should be dismissed. We can deal with these parts of the appeal quite shortly, as they involve questions of fact and contextual contractual interpretation which, in our view, are clearly not suited to summary judgment.
Did the Building Contract clearly allow DDC to register the mortgages?
This submission turns on an interpretation of the Building Contract and the surrounding facts. We have set out cl 19.5 of the Building Contract above at [3]. Clause 19.7 provided further:
19.7The rights to perform all acts and do all things under all or any of the terms and provisions contained or implied in the mortgage or conferred by statute, may (without any obligation whatsoever) be performed and done by the Builder in the capacity of attorney pursuant to clause 19.5.
We note that no formal power of attorney was executed in accordance with cl 19.5(b).
In our view it is arguable that cl 19.5 of the Building Contract provides for the owner as defined (the Body Corporate), and the Body Corporate only, to provide a mortgage. Mr Thompson was not the Body Corporate. He was an owner of two units. Mr Thompson had signed the Building Contract, but only as one person out of two, presumably both being representatives of the Body Corporate. There is no indication that he signed in his personal capacity. On the face of cl 19.5 it does not apply to any particular units, but only “the Owner’s estate and interest in the Property”, that is the Body Corporate’s property. There was no evidence indicating that the Body Corporate had authority to mortgage Mr Thompson’s units. It is arguable therefore that cl 19.5 gave no authority to DDC or its lawyers Turner Hopkins, or their partners or employees, to register a mortgage against Mr Thompson’s units.
It is true that this created a somewhat anomalous situation, as the land the Body Corporate owned was unlikely to be saleable of itself. However the issue of what the Body Corporate owned, and the background commercial situation, are matters of fact, to be determined at a hearing. It is certainly arguable that the Building Contract on its face gave no rights to DDC or its agents to execute a mortgage over Mr Thompson’s unit titles.
Further, there is no evidence that the Body Corporate executed any power of attorney. It is arguable whether or not this was required, and again the background facts may be relevant. There may also be force in the submission put forward on behalf of Mr Thompson that he never signed any memorandum in writing sufficient for the purposes of s 25 of the Property Law Act.
It may also be relevant in the interpretation exercise that cl 19.6 of the Building Contract gave DDC the ability to register a caveat against the title in respect of DDC’s interest as mortgagee. This may lend support to the argument for Mr Thompson that there was no authority conferred by the contract to unilaterally register a mortgage, as distinct from lodging a caveat.
We do not see any need to go through Ms Grant’s further submissions in detail. The threshold that has to be crossed by Mr Thompson is not a high one, and there is a sufficient question mark over whether cl 19.5 applies to Mr Thompson’s unit titles to persuade us that this aspect of the claim is arguable.
Can Turner Hopkins be liable?
Ms Grant submitted that the duty to certify accurately is personal to the solicitor who certifies. This could be a strong point if the cause of action was a breach of statutory duty. However that is not now the issue. The cause of action we have found to be arguable is based in negligence. The ordinary principles of vicarious liability are likely to apply and it is not unarguable that Turner Hopkins could be liable for any negligence by Mr Stirling as a partner.
Did Mr Thompson cause his own loss?
As to the final argument that Mr Thompson caused his own loss, that turns on a finding that Mr Thompson was at fault in not paying the invoiced amounts. The allegations of fault on the part of DDC seem to be an arguable answer to this assertion. Therefore, summary judgment on this basis would be inappropriate.
Conclusion on the other defences
We conclude therefore that the further defences and arguments referred to in the notice of intention to support the judgment on other grounds do not show the claim as certain to fail.
General conclusion
We are not satisfied that the proposed negligence cause of action cannot succeed. Under r 12.2 of the High Court Rules a defendant must satisfy the court that none of the causes of action in the plaintiff’s statement of claim can succeed before summary judgment will be entered. We find that one cause of action might succeed.
We therefore allow the appeal. We grant Mr Thompson leave to file the draft amended pleading attached to the further submissions of 23 February 2018.
Result
The appeal is allowed, and the judgment of Associate Judge Doogue, insofar as it grants summary judgment in favour of Turner Hopkins, is set aside. Mr Thompson’s claim in negligence against Turner Hopkins must be resolved at trial.
Costs
Both parties have provided submissions on costs. Ordinarily, costs follow the event. In this Court Turner Hopkins has failed, but only because of Mr Thompson’s last-minute proposed amendment to the pleadings to add a cause of action, as we have outlined. But for that very late development, the appeal would have failed. From Turner Hopkin’s perspective, it might have taken a different procedural path if negligence had been pleaded earlier. For these reasons we do not think it appropriate that Mr Thompson, although ultimately successful, should have any costs in this Court.
However we are not prepared to go as far as Ms Grant asks, and award costs in favour of Turner Hopkins despite the appeal being allowed. This is because Mr Thompson has in the end succeeded in the appeal and because, as we have mentioned, last-minute amendments are always a possibility when the shortcut of a strike-out or summary judgment application is pursued by a party. Turner Hopkins took the risk of such late additions. Accordingly, there is no order as to costs in this Court.
We have not been asked to revisit the High Court order reserving costs in that Court. High Court costs should be determined by that Court.
Solicitors:
Pidgeon Law, Auckland for Appellant
Jones Law, Auckland for Respondent
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